Income gap grows in U.S.

By -
The Washington Times -
Saturday, July 30, 2005

Incomes are growing smartly for the first time in years, spurring unexpectedly robust spending by consumers. The revival, however, is mainly among top earners who receive stocks, bonuses and other income in addition to wages.

The nearly 80 percent of Americans who rely mostly on hourly wages barely maintained their purchasing power, according to the Labor Department. Raises have been meager, averaging about 2.7 percent in the past year — a tad above the 2.5 percent inflation rate.

Incomes are up a more robust 7.5 percent when bonuses, stock compensation, commissions and other wage supplements are added, according to the Commerce Department.

Most of the boost, though, is felt by those at the top end of the income scale.

Federal Reserve Chairman Alan Greenspan expressed concern in testimony earlier this month about the disparity between wage-earners and high-income executives and professionals, which by some measures is the biggest in the United States since the Roaring ‘20s.

The Fed chairman, who frequently is asked about the problem in congressional hearings, attributes the disparity to diverging education and skill levels between the nation’s top earners and those at the middle and bottom of the income scale.

“I think it’s a very disturbing trend,” Mr. Greenspan told the Senate Banking, Housing and Urban Affairs Committee. “It is a reflection, as best I can judge, of a faulty educational system in the United States. As you know, we’ve got relatively poor marks internationally, especially as our students move from the fourth grade to the 12th grade.”

Mr. Greenspan is not alone in concern about the inadequate educations that diminish opportunity for many American workers and open a growing income gap.

He is joined by major businesses organizations and prominent individuals, including Microsoft Chairman Bill Gates and former General Electric Chairman Jack Welch, who are putting time, money and effort into doing something about it.

The failure of the American educational system to ensure that children in middle school and high school are taught the math, science and technological skills they need to get good-paying jobs is at the root of the problem, Mr. Greenspan and others say.

Japan and Europe — where income disparities are not so large — and even developing countries such as China, India and Russia are producing many times the engineers and technicians produced in American universities, they note.

Good-paying jobs — whether in computers, health care or basic industries, such as energy and machinery — increasingly require a strong grasp of math and science and sophisticated technological skills.

Students who graduate without those or other specialized abilities end up competing for a dwindling number of unskilled or low-skilled jobs, driving down wages for those positions, Mr. Greenspan noted.

To make matters worse, many of the lesser-skilled jobs once available in manufacturing and other areas are migrating overseas to countries where wage levels are far lower.

The disparity has become so acute, Mr. Greenspan said, that shortages are emerging in many high-skilled professions — driving up income for the most-sought-after workers — even as the majority of Americans continues to experience depressed wages.